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WSL
WSL
WSL - Wescoal Holdings Limited - Reviewed interim results for the six months
ended 30 September 2010
Wescoal Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 2005/006913/06)
(JSE code: WSL ISIN: ZAE000069639)
("Wescoal" or "the Group")
Reviewed interim results for the six months ended 30 September 2010
SALIENT FEATURES - CONTINUING OPERATIONS
Revenue up 54%
EBITDA of R27,8m up 168%
Operating profits up 212%
Headline earnings per share - 8.3 cents - up 137%
Cash from operation activities - R14.3 m
CONDENSED REVIEWED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2010
The interim results for the six months ended 30 September 2010, with
comparative results for the period ended 2009 and the audited results for the
year ended 31 March 2010 are presented.
Condensed consolidated statement of comprehensive income
Reviewed Reviewed Audited
interim interim results
results for results for for the
the six the six year
months months ended
ended ended 31 March
30 30 2010
September September R`000
2010 2009
R`000 R`000
Continuing operations
Revenue 334 303 217 451 386 549
Gross profit 42 412 22 700 40 586
Other operating income 62 1 289 1 432
Operating costs (14 641) (13 606) (27 270)
Earnings before interest, 27 833 10 383 14 748
tax, depreciation and
amortisation
Depreciation (3 624) (2 416) (5 902)
Amortisation (6 631) (2 324) -
Earnings before interest, 17 578 5 643 8 846
tax and other costs
Profit on sale of assets 416 3 616 3 294
Impairment of assets - - (3 716)
Investment income 93 1 274 1 459
Finance costs (736) (320) (1 339)
Profit before taxation 17 351 10 213 8 544
Taxation (4 971) (2 872) (2 836)
Profit for the period from 12 380 7 341 5 708
continuing operations
Discontinued operations (719) - -
Loss after tax from
discontinued operations -
Wescoal Mineral Recoveries
(Note 1)
Profit for the period 11 661 7 341 5 708
Attributable to: 11 805 7 574 6 672
(144) (233) (964)
Equity holders of the
group
Minority interest
Profit for the period 11 661 7 341 5 708
Headline earnings
reconciliation:
Net profit for the period 11 661 7 341 5 708
Less: Profit on sale of (329) ( 2 604) (2 566)
assets
Plus: Impairment of assets - - 2 140
Plus: Minority interest 144 233 964
Headline earnings for the 11 476 4 970 6 246
period
Ordinary shares in issue
(000`s)
- Total at period end 145 931 145 931 145 931
- Weighted average shares
in issue 145 931 143 673 145 931
- Fully diluted weighted 147 558 145 853 146 314
average shares in issue
(Note 2)
Earnings per share:
Attributable earnings per 8.1 5.3 4.6
ordinary share (cents)
Headline earnings per 7.9 3.5 4.3
ordinary share (cents)
Fully diluted attributable 8.0 5.2 4.6
earnings per ordinary
share (cents)
Fully diluted headline 7.8 3.4 4.3
earnings per ordinary
share (cents)
Earnings from continued
operations
Attributable earnings per 8.5 5.3 4.6
ordinary share for
continuing operations
(cents)
Headline earnings per 8.3 3.5 4.3
ordinary share for
continuing operations
(cents)
Fully diluted attributable 8.4 5.2 4.6
earnings per ordinary
share for continuing
operations (cents)
Fully diluted headline 8.2 3.4 4.3
earnings per ordinary
share (cents)
Earnings from discontinued
operations
Attributable earnings per (0.4) - -
ordinary share for
discontinued operations
(cents)
Headline earnings per (0.4) - -
ordinary share for
discontinued operations
(cents)
Fully diluted attributable (0.4) - -
earnings per ordinary
share for discontinued
operations (cents)
Fully diluted headline (0.4) - -
earnings per ordinary
share for discontinued
operations (cents)
Notes:
1. Discontinued Operations - Wescoal Mineral Recoveries
In March 2010, the Board of directors made a decision to discontinue the
operations of Wescoal Mineral Recoveries (Pty) Ltd. The major assets of
the company were disposed of subsequent to the reporting period and will
not impact significantly on earnings for the second half of this
financial year.
2. Fully diluted earnings per share information is reflected showing the
potential effect of dilution for 8.47 million options held in terms of
the share incentive trust by the directors and employees to subscribe
for new shares in Wescoal.
Condensed consolidated statement of financial position
Reviewed Reviewed Audited
interim interim results for
results for results for the year
the six the six ended
months ended months ended 31 March
30 September 30 2010
2010 September R`000
R`000 2009
R`000
ASSETS
Non-current assets 145 260 99 311 128 670
Property, plant and 49 047 26 958 49 557
equipment
Mine establishment 18 496 - -
costs
Investment property 709 709 709
Goodwill 54 513 54 513 54 513
Intangible assets 18 191 13 614 19 743
Deferred taxation 4 304 3 517 4 148
Current assets 160 386 111 143 116 454
Inventories and work 29 002 22 175 37 449
in progress
Trade and other 111 302 54 146 67 624
receivables
Cash and cash 20 082 34 822 11 381
equivalents
Non-current assets - - 3 058
held for sale
Total assets 305 646 210 454 248 182
EQUITY AND
LIABILITIES
Total Shareholders` 178 515 167 471 166 655
funds
Non-current 14 635 3 123 10 145
liabilities
Current liabilities 112 496 39 860 71 382
Trade and other 106 885 37 286 66 870
payables
Current portion of 5 611 2 574 4 512
long-term liabilities
Total equity and 305 646 210 454 248 182
liabilities
Net asset value per 122.33 114.76 114.20
share (cents)
Tangible net asset 72.51 68.08 63.32
value per share
(cents)
Condensed Consolidated Statement of Changes in Equity
Attributable to equity holders of the company
Share Share premium Retained Share
capital R`000 earnings options
R`000 R`000 reserves
R`000
Balance at 1 April 146 123 704 44 033 305
2010
Earnings - - 11 804 200
attributable to
shareholders
Balance as at 30 146 123 704 55 837
September 2010
505
Minority Total
interests equity
Balance at 1
April 2010 (1 533) 166 655
Earnings
attributable to
shareholders (144) 11 860
Balance as at 30
September 2010
(1 677) 178 515
Condensed Consolidated Cash Flow Statements
Reviewed Reviewed Audited
interim interim results for
results for results for the year
the six the six ended
months months ended 31 March
ended 30 September 2010
30 2009 R`000
September R`000
2010
R`000
Net cash from operating 9 593 10 209 22 804
activities before
working capital changes
Working capital changes 4 784 (28 119) (33 161)
Net cash from operating 14 377 (17 910) (10 357)
activities after
working capital changes
Investing activities (9 220) (3 248) (41 161)
Financing activities 3 544 (656) 6 262
Net increase/(decrease) 8 701 (21 814) (45 256)
in cash and cash
equivalents
Cash and cash 11 381 56 637 56 637
equivalents at
beginning of period
Cash and cash 20 082 34 823 11 381
equivalents at end of
period
Operations, Market and Financial Review
Mining Division
The Khanyisa Colliery ("Khanyisa") continues to perform well and in the
period April to September 2010 produced 887,000 tons of which 546,000 tons
was supplied to Eskom. The operation is well on track to mine the stated
target of 1,2 million tons of ROM by the financial year end on 31 March 2011
and it is forecast to have supplied Eskom 900,000 tons in the same period.
The division has however incurred additional overheads related primarily to
health and safety and environmental issues with specific focus on water use
and management. The division`s performance in these areas has been excellent
and management wants it to remain so and where possible, improve further.
During this period the group has secured long-term contracts to supply
product to major users in both the cement and lime and municipal power
generation sectors which has only been made possible by the group`s move to a
primary producer with sustainable resources.
The recently announced acquisition of the Elandspruit reserve, situated
approximately five kilometres south-west of Middelburg, Mpumalanga, will
ensure coal sustainability for the next few years. It has an indicated
resource level of 11,6 million tons of which 4,3 million tons is
metallurgical type coal, 4,1 million tons is thermal coal suitable for the
inland and/or export markets the remainder is Eskom type product.
The group`s coal washing operations at Blesboklaagte was again unprofitable
for the six month period. The company is currently evaluating various options
to get this operating at a profitable level.
There have been no material changes in the resources of the company save for
the acquisition of Elandspruit reserve which is expected to become
unconditional in early 2011.
Trading Division
A positive result was experienced in the division with volumes up 17% as
compared to the comparative six month period and a definite reversal of the
downward trend experienced during the period September 2009 to March 2010.
The positive developments for the trading environment are the API#4 export
price being steady at $100 coupled to Transnet Freight Rail ("TFR") achieving
record delivery rates to Richards Bay Coal Terminal ("RBCT") since July 2010.
These developments have contributed to the first local price increase since
mid 2008 of 10% on 1 July 2010 and management expects a further 10 to 15%
during 2011 but expects margins to remain under pressure.
In addition the division is experiencing increased demand from the local
manufacturing industries which indicates an improved performance going
forward.
Financial
Overall the group achieved a turnover increase of R117 million (54%) due
mainly to the incorporation of Khanyisa for the full period under review. The
increased turnover, together with a margin increase to 9,9% from 8,6% and
strict cost controls, resulted in a R5,0 million (69%) increase in profit
from continuing operations.
The company achieved an EBITDA of R27.8m which represents an increase of 168%
as compared to the prior interim period. This is mainly due to the inclusion
of mining profits earned by Khanyisa.
Headline earnings per share ("HEPS") from continued operations of 8,3 cents
reflects a 137% increase as compared to the prior interim period.
Segment analysis from continuing operations
The analysis below details the contribution of the two main divisions within
the Group:
R`000
30 September 2010
Income Statement Trading Mining Elimination Total
of
intergroup
Revenue 174 126 249 303 (89 126) 334 303
Profit from 3 036 14 542 - 17 578
operations
Headline earnings 2 186 10 657 (463) 12 380
R`000
30 September 2010
Balance Sheet Trading Mining Elimination Total
of
intergroup
Current assets 81 006 79 380 - 160 368
Non current assets 115 804 62 020 (105 268) 72 556
Goodwill and 70 244 - 2 460
intangibles 72 704
Shareholders funds 162 540 13 515 2 460
Non current 178 515
liabilities 52 158 69 613 (105 268) 16 503
Current liabilities 52 356 58 272 - 110 628
R`000
30 September 2009
Income Statement Trading Mining Elimination Total
and of
other intergroup
Revenue 191 412 50 038 (23 999) 217 451
Profit from
operations 4 583 1 060 - 5 643
Headline earnings 7 012 562 (2 604) 4 970
R`000
30 September 2009
Balance Sheet Trading Mining Elimination Total
and of
other intergroup
Current assets 83 195 27 948 - 111 143
Non current assets 164 755 10 668 (144 239) 31 184
Goodwill and
intangibles 65 667 - 2 460 68 127
Shareholders funds 167 436 ( 2 425) 2 460 167 471
Non current
liabilities 113 274 34 088 (144 239) 3 123
Current liabilities 32 907 6 953 - 39 860
Prospects
The mining division will continue to improve as non-recurring costs were
incurred during the reporting period and further savings are expected from
the replacement of rented equipment with company-owned equipment and other
cost-saving initiatives.
The trading division experienced a poor second half of the prior financial
year, ended 31 March 2010, however the encouraging developments in the
trading division experienced during the period under review will ensure this
is not repeated.
With the incorporation of Khanyisa into the mining division, the trading
division will no longer generate the bulk of the group`s profit.
The Elandspruit feasibility is at an advanced stage and should be completed
with the transaction becoming unconditional early in 2011.
Black Empowerment
Waterberg Portion Property Investments (Pty) Limited ("WPP") and the major
shareholders of WPP, Mr Robinson Ramaite and Mr Erik Mzimela holds 34.9% of
the issued share capital of Wescoal Holdings Limited. WPP is a BEE Company
operating in the minerals and energy space.
Corporate Governance
The Group subscribes to and is in the process of implementing, where
applicable, the principal recommendations of the King III Code of Corporate
Governance.
Dividends
No interim dividend has been declared.
Accounting policies and presentation
The unaudited interim financial statements for the six months ended 30
September 2010 are prepared in accordance with International Financial
Reporting Standards ("IFRS"), and in a manner required by the Companies Act,
and incorporate responsible disclosure in line with the accounting philosophy
of the group. The financial statements are based on appropriate accounting
policies consistently applied and supported by responsible and prudent
judgements and estimates.
Review opinion
The group`s auditors, Middel & Partners have reviewed the financial
information in terms of Rule 3.18 of the listing requirements of the JSE.
Their unqualified review opinion is available for inspection at Wescoal`s
offices.
By order of the Board
2 December 2010
M.R. Ramaite A.R. Boje
Chairman Chief Executive Officer
CORPORATE INFORMATION
Non-Executive directors: MR Ramaite
JG Pansegrouw
T van Gaalen
W Khumalo
Executive directors: AR Boje
P Janse van Rensburg
Registration number: 2005/006913/06
Registered address: 228 Voortrekker Street
Krugersdorp
1740
Postal address: PO Box 133
Krugersdorp
1740
Company secretary: CIS Company Secretaries (Pty)
Limited
Telephone: 011-954 2721
Facsimile: 011-954 6737
Transfer secretaries: Computershare Investor
Services (Pty) Limited
Sponsor: Exchange Sponsors (2008) (Pty)
Limited
Date: 02/12/2010 08:00:03 Produced by the JSE SENS Department.
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